Rates to remain unchanged

Paul Bloxham from HSBC said the recent appreciation of the Australian dollar (AUD) is likely to be of some concern to the RBA, but fears of ‘over-inflating’ housing prices will prevent any rate reduction.

“While a lower currency would be preferred, the recent AUD appreciation does appear to be mostly for the right reasons,” said Mr Bloxham.

“Chinese growth is lifting and commodities prices are rising.

“With that in mind, the RBA may be more comfortable with the AUD rise than they were when commodity prices were falling,” he said.

The news comes despite the latest retail figures showing that Australians are still not willing to part with their disposable income. The most recent NAB monthly retail sale index showed that both online and regular retail stores hadn't performed well in August.

While the Reserve Bank often takes other economic indicators into consideration, according to Mr Bloxham the greater concern is excessive growth in housing prices.

“There are already some early signs that the RBA is becoming more concerned about the housing market,” he said.

“While rising housing prices are a necessary part of the rebalancing of growth that the RBA is hoping will occur, they would be worried if housing prices accelerate too much.”

In the year to date, combined capital city home values have risen 5.9 per cent, with the Sydney market growing fastest at 8.6 per cent.